What does the Spring Budget mean for small businesses? 2023

Chancellor Jeremey Hunt has delivered his Spring Budget for 2023. From energy bill support to tax changes, here are the key announcements from the March budget that small businesses and small business owners need to know.

Energy bill support

Although the Spring Budget fell short of mentioning energy bill support specifically for businesses, the chancellor announced that the average household energy cap will remain at £2500 for at least the next three months.

The Energy Price Guarantee extension means that households in the UK will be relieved of money pressures which could mean more disposable income available to spend at independent and small businesses.

Research and development opportunities

During the Spring Budget announcement, it was revealed that the government will introduce a new tax credit for small businesses that spend 40 per cent of their expenditure on research and development.

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The enhanced tax credit scheme will see businesses be able to claim back £27 for every £100 invested in R&D. Research and development tax relief can include new processes, products, and services or making ‘appreciable improvements’ to existing ones. It can even be claimed on unsuccessful projects that meet the government’s definition of R&D.

New investment initiatives

The current super deductions scheme is ending on March 31 and will be replaced with ‘full expensing’. This scheme will reduce tax liabilities for businesses investing in new IT, plant, and machinery equipment. The new investment allowance means that companies can write off these costs in one go straight away.

The full expensing scheme is only available to businesses liable to pay corporation tax. It cannot be applied to second-hand purchases, company gifts, new car purchases, or items bought to lease to someone else.

In addition, all businesses will also receive 100 per cent first-year relief for plant and machinery investments up to £1m. Most tangible assets, including but not limited to office equipment warehousing and tools, may qualify for full expensing.

Corporation tax to rise to 25 per cent

Following the Spring Budget announcement, corporation tax has been increased to 25 per cent from 19 per cent in effect from April 2023.

This tax hike applies to businesses with annual profits between £50,000 and £250,000. Small businesses with profits of below £50,000 will continue to pay 19 per cent corporation tax.

The lower and upper limits will be reduced for short accounting periods and if you operate multiple limited companies, where one company is controlled by the other, the limit is also reduced.

However, according to the Treasury, the majority of businesses will be unaffected.

If you are a director or owner of a company, you are liable to pay corporation tax in the UK but there are ways you can reduce your corporation tax bill. To ensure you remain compliant while benefiting from a lower tax rate, get advice from React Accountancy.

To see how the changes made in the Spring Budget in 2023 affect your small business, get in touch with the expert small business accountants at React Accountancy.

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